Brace yourself for a bleak Christmas as rand takes a dive
The Times Editorial: We take no pleasure, as the festive season approaches, in advising readers to tighten their belts. But a perfect storm of a weakening rand, diminishing prospects for economic growth, high levels of personal indebtedness and inflationary pressure leave us little choice.
For starters, the price of just about everything that is imported - think fuel, electronic appliances, cars, clothes - is likely to go up if the rand continues its recent decline. Earlier this week our currency dived to its lowest level against the dollar in three years. The rand was still trading around R8.77 to the dollar when the markets closed yesterday.
This might be good news for exporters - though our embattled mining industry, under the cosh from unprecedented strike action in the aftermath of the Marikana violence, is unlikely to reap the benefits - but it will hurt consumers.
Our currency stood up well against the dollar in the face of the global financial crisis, but for the first time now, negative domestic factors - the upsurge in strikes, the increasing likelihood of the ANC opting for some form of nationalisation of mines, even the spectre of serious political instability - are conspiring to drive the rand down.
Petrol and diesel prices are already at all-time highs, with the price of petrol hiked to R12.20 a litre last week. Central Energy Fund statistics suggest a petrol price increase of as much as 40c a litre is likely if oil prices stay at current levels and the rand remains weak.
If the fuel price remains stubbornly high, the prices of food and other goods will increase.
This, in turn, will leave the Reserve Bank with no room to trim the repo rate at its final meeting of the year, thereby further relieving the burden on cash-strapped consumers, as it had been expected to do.
Under these conditions, resisting the impulse to splurge and instead using that precious Christmas bonus to reduce debt and start saving makes an awful lot of sense.